Nobel laureate picks a fightJoseph Stiglitz is no bully. After last year’s publication of Globalisation and its Discontents, which set off a limpet mine under the cosy and unchallenged world of International Monetary Fund policymaking, the Nobel Prize-winning economist now has his sights set closer to home.

Corporates prefer foreign loans
New Delhi, May 25
The bank rate in the country has touched a 33-year low of 6.0 per cent, but a FICCI survey showed that the industries still rue over rising average cost of funds, making them prefer foreign loans to domestic ones.
The FICCI survey was done on various sectors including steel, power,
automobiles, engineering, telecom, FMCG, cement, entertainment,
textiles, agro and IT.

Canara Bank, SBI to float bank in Russia
New Delhi, May 25
India’s Canara Bank and State Bank of India plan to jointly float a bank in Russia - Commercial Bank of India-as per an agreement between the two countries.
During the recent visit of External Affairs Minister Yashwant Sinha to Russia both sides had agreed to host each others’ banks for boosting trade ties.

A masked vendor waits for customers as she stands next to a masked model outside a newly opened specialty shop for SARS memorabilia in Beijing
on Sunday — Reuters

North as tourist destinationGiven the northern region’s topographical and cultural diversity, there is no doubt that immense potential exists for trade opportunities in both traditional tourism related areas and in less traditional fields ranging from the heritage hotels and restaurants, to the setting up of golf courses, amusement parks, adventure and water sports complexes, health and herbal resorts, domestic airports and air taxi operations.

Inflation slips to 6.03 pc
New Delhi, May 25
After staying above 6 per cent for seven weeks in a row, the inflation rate fell to 5.90 per cent for the week ended May 10 as compared to 6.03 per cent recorded in the previous week.

MARKET UPDATE

Old economy comes
to the rescueThe BSE Sensex remained lacklustre as weakness in index heavyweights and technology shares offset the strength in old economy shares. Heavy losses in IT shares precipitated a 6.74-point fall in the Sensex to 3,049.84 this week from the previous week’s close of 3,056.58.

Banking PSU — book profit

PSU stocks — buy selectively

Steel — buy

Forecast

CHECKOUT

Delay in paying refund may attract fineSometime ago, the apex consumer court took a serious note of the delay on the part of the Haryana Urban Development Authority
in complying with the orders of the consumer courts and imposed exemplary costs on it.

Joseph Stiglitz is no bully. After last year’s publication of Globalisation and its Discontents, which set off a limpet mine under the cosy and unchallenged world of International Monetary Fund policymaking, the Nobel Prize-winning economist now has his sights set closer to home.

Stiglitz is putting the finishing touches to a searing critique of Dubyanomics. The emergence of a neo-conservative economics makes the Columbia University professor almost nostalgic for the neo-liberalism that he successfully debunked last year.

“They talk a free-market ideology but, if you look at their politics in terms of bailouts and protectionism, it is not a free-market policy; if you look at their procurement agenda and what they did with Bechtel in Iraq, it doesn’t even look like a fair competition agenda. So you have to sort of suspect an element of ideology but more an element of particular groups seizing control,” says the former chairman of the White House council of economic advisers under President Clinton.

Stiglitz drives a bulldozer through US domestic economic policies, too. The American economy has lost 2 million jobs since Bush came to power.

“There is less concern about distributive issues, about unemployment, welfare, education and safety nets,” says Stiglitz. “Underneath this there is an anti-distributive agenda. You can’t look at the proposed ($695bn) dividend tax cut without seeing this. There are ways of integrating corporate and personal income tax while maintaining progressivity, like in Europe. Their attempt here was to destroy progressivity under the name of a structural agenda.”

He was one of 350 top economists who signed a high-profile letter in March warning President Bush of the risk that chronic deficits would imperil public pensions and healthcare provision.

“It is not just that they do not pay much attention to it but they are positively engaged in increasing inequality,” says Stiglitz.

Roaring Nineties, his new book, due out in autumn, will contain an account of his time at the White House during the Clinton boom years. In the first two years of the current Bush administration, that boom has been reclaimed as the ultimate success of Reaganomics.

“There’s no evidence that the pace of productivity growth in the 1980s was different to that of the 1970s, labour force participation was no better, savings were no higher,” Stiglitz says. “There’s no economic evidence in favour of these Reagan supply-siders.”

And it is this lack of evidence that has been his shield in battles with the IMF. The Washington institution responded aggressively to Stiglitz’s last book. In an open letter to him, Ken Rogoff, the IMF’s chief economist, said: “I fail to detect a single instance where you admit to having been wrong. When the US economy booms in the 1990s, you take some credit. But when anything goes wrong it is because lesser mortals like Federal Reserve Chairman (Alan) Greenspan or then-Treasury Secretary (Robert) Rubin did not listen to your advice.”

It was stinging stuff from Rogoff, which helped boost sales considerably.

Being the World Bank’s chief economist from 1997 until being forced out in 1999, reportedly by the US Treasury, gave this intellectual outsider an inside track.

In Globalisation, he documented the IMF hit squads that decided a nation’s spending priorities from the comfort of five-star hotels. He compared their methods to those of modern high-tech warfare. “Dropping bombs from 50,000 feet ensures that one does not ``feel’’ what one does,” Stiglitz wrote.

He regularly pointed to the empirical evidence that showed central bank independence and capital market independence were, at best, neutral for developing country growth, and often disastrous.

“It can only be ideology. The record shows that capital market liberalisation often causes problems — instability rather than growth,” he says.

In fact, a year after launching their assault on Stiglitz, the IMF attack dogs appear to be in full retreat. Stiglitz is grimly amused that the IMF recently published a mea culpa, of sorts, which concluded that countries that follow IMF suggestions often suffer a “collapse in growth rates and significant financial crises”. Rogoff is one of its authors.

Not content with using his intellectual capital to show up the failure of Washington policymaking, Stiglitz has also been developing what might be the next revolution in economic theory. He won his Nobel prize for work on ‘informational asymmetries’.

Last week he delivered Oxford University’s prestigious Clarendon Lecture on refashioning the work of Keynes for the 21st century. It will fill in the gaps between his pioneering theoretical work on informational asymmetries, and his policy prescriptions for the World Bank, White House and IMF.

Today’s economic conventions assume a ‘representative agent’, a person whose economic behaviour can be simply modelled by mathematical equations and then totted up in their millions to work out the macroeconomic effects of different policies. In turn, such models inform the wrongheaded policies of Bush and the IMF, he says. The problem with this theory is that there is no such single representative of man’s economic behaviour. Instead, different access to information drives economic decision-making.

Traditional theory focuses on the labour market and the need for flexibility. The macro policy implication of Stiglitz’s approach is to focus on the inadequacies of capital markets riven with these information problems.

And with this framework, he believes he’s found out why conventional economic theory, and its unquestioning followers at the IMF and US Treasury, gets things wrong so often.

‘One of the policy implications is that it calls to attention aspects of economics that differ from region to region,’ he says.

Stiglitz is taking on four decades of economic convention. His new polemic, coming on the eve of an election year, will be feared in a White House that knows the economy is its Achilles Heel.

New Delhi, May 25
The bank rate in the country has touched a 33-year low of 6.0 per cent, but a FICCI survey showed that the industries still rue over rising average cost of funds, making them prefer foreign loans to domestic ones.

It said 67 per cent of the respondents considered high cost of borrowing as one of the long time cause of concern and that 75 per cent of the surveyed industries, mainly belonging to old economy as steel and power, said their average cost of funds to be over 11 per cent.

“As much as 46 per cent of the respondents found foreign loans to be more economical than the domestic credit,” the survey on ‘The Financing Needs of the Industry’ said, adding that 47 per cent of them had accessed foreign debt market with a sizeable proportion raising funds in dollars.

It said roughly half of them, with a turnover of over Rs 500 crore, had cost of foreign loans at LIBOR plus 0-1 per cent. At present, LIBOR ranges between 1.25-1.50 per cent.

It said over 50 per cent of the respondents called for a further cut in the small savings rate for aligning borrowing rates with the lending rates.

“Though the interest rates have come down in the past, 75 per cent of the respondents felt that interest rates are not low enough,” it said, adding that 42 per cent of them wanted real interest rates to be 4-6 per cent, while another 34 per cent said it should be 6-8 per cent.

Interestingly, 62 per cent of the surveyed industries said their financing needs had not been met and another 47 per cent held that the banks were reluctant to lend.

As if justifying this contention, the survey found that a whopping 41 per cent of the
industries had financed 80-100 per cent of the funding requirements through internal surplus in 2002-03.

Citing these anomalies, the study asked how the country was going to achieve an ambitious eight per cent growth as envisaged by the Planning Commission. PTI

New Delhi, May 25
India’s Canara Bank and State Bank of India plan to jointly float a bank in Russia - Commercial Bank of India-as per an agreement between the two countries.

During the recent visit of External Affairs Minister Yashwant Sinha to Russia both sides had agreed to host each others’ banks for boosting trade ties.

The Indian initiative will be led by Canara Bank and SBI.

“In the new venture, which will have a capital of $ 20 million Canara Bank and SBI will hold 40:60 equity respectively,” Mr R.V. Shastri, Chairman and Managing Director of Canara Bank, told UNI here.

“All plans were ready, only a final clearance from the Russian Government is awaited. The staff has been identified as also the premises,” Mr Shastri said.

Indian trade and investments had suffered a setback after the collapse of the erstwhile Union of Soviet Socialist Republic (USSR), but Indian business now wants to be a part of the growing Russian prosperity. Indian businessmen are increasingly looking to that country for enhancing trade.

Canara Bank Chairman said the global business of Canara Bank has been growing at a very rapid rate. It is slated to reach Rs 1.31 lakh crore by March 2004 with a growth rate of 16 per cent. This will comprise Rs 82,000 crore under deposits and Rs 49,000 crore under advances.

Mr Shastri said thrust of the bank would be to garner low cost deposits during the year.

When asked about Bangalore-based bank’s plans to enter General Insurance segment, Mr Shastri said bank will be able to identify a partner in three months.

“We are having discussions with a number of local players like United India Insurance and New India Assurance.’’

Its foray into General Insurance follows its successful venture into life insurance with Aviva, the seventh largest insurance company in the world. The bank has an marketing alliance with Aviva.

Talking about the other initiatives the Bank proposes to embark upon, Mr Shastri said, Canara Bank will double its ATM strength to 500 by March 2004.

The bank, with a large customer base of 25 million customers, will launch Mobile and Internet banking by June 2004 and 500 branches will be covered under Anywhere Banking facility by March 2004.

“While the number of Credit Cds in circulation would be expanded substantially, the Bank will also be launching Debit Card during the first half of the current year,” Mr Shastri said.
UNI

Given the northern region’s topographical and cultural diversity, there is no doubt that immense potential exists for trade opportunities in both traditional tourism related areas and in less traditional fields ranging from the heritage hotels and restaurants, to the setting up of golf courses, amusement parks, adventure and water sports complexes, health and herbal resorts, domestic airports and air taxi operations.

Like the southern states of Andhra Pradesh, Karnataka, Kerala, and Tamil Nadu, which are getting together to promote themselves as a Diamond Quadrangle and the recent creation of the north-east brand, ‘Eastern Eight’, and the slogan, ‘Eight states, 8000 reasons to visit’, Punjab, Haryana, Himachal Pradesh, J&K and Chandigarh which constitute a unique socio-geographical unit of the country, need to coordinate their efforts for joint planning, marketing and management of tourism products and services. They also need to pool their resources to project this region as one compact destination.

In view of the profound changes taking place throughout the world, rural (farm) tourism is being taken up by many a state government in the country. Northern Indian states could select certain villages with unique salient features and develop them as model tourism villages which reflect their cultural and historical heritage. Heritage villages like Chokhi Dhani near Jaipur, which showcase the history and culture, archaeology and architecture, and unique lifestyles of the people, if set up, would go a long way in creating a large number of direct and indirect jobs and income opportunities.

Northern Indian states are dotted with religious and pilgrimage centres which attract millions of devotees every year. However, facilities at these places are woefully lacking. Master plans for places like Jwalamukhi, Chintpurni, Nainadevi in HP and for other places in other northern Indian states should be prepared with emphasis on sanitation, economy accommodation and catering facilities.

While developing facilities for different categories of tourists, we should also develop facilities for youth and those who travel on shoe string budgets. These facilities should be in the form of youth hostels, huts, cabins, and tentage colonies. Rest houses located on important trek routes should be equipped with blankets and other facilities for use by the trekkers and others.

Health & herbal tourism with thrust on ayurveda, meditation, yoga and panchkarma is fast emerging as a significant segment of the overall tourism spectrum with Kerala being a success story where a large number of domestic and international visitors come to avail of the indigenous therapies. 90 per cent of more than 2 lakh foreign tourists visit Kerala for rejuvenating therapies based on ayurveda. Northern Indian states should explore the possibility of developing holistic health destinations and introduce Panchkarma packages in their tourist bungalows and other establishments.

With a view to bridging the seasonal gap in tourist traffic, joint inter-state tourism packages need also to be organised, besides working out specially designed customised packages for the non-resident Indians. Incentives and facilities should also be offered to the film and TV directors and producers to make films in this region. Efforts should also be made to improve and upgrade infrastructural facilities at the airports, make greater use of the helipads, work out air packages and introduce helicopter/chopper services from Chandigarh to places of interest in HP, J&K, UP, Uttaranchal, Punjab, Haryana and even to Rajasthan.

Culture-cuisine-craft festivals should also be organised jointly by the northern Indian states at important tourist generating cities, while a compendium providing information on places of tourist attraction, facilities, maps, package and conducted tours etc need also be brought out by these states.

However, to successfully implement the plans and policies, northern Indian states may cooperate in developing quality human resource for tourism, hospitality and aviation sectors. For coordination a board with representatives from all the northern Indian states should be constituted with representatives both from the public and private sectors. The Chief Ministers of Punjab and Himachal Pradesh had said in the past for forging joint strategies for regional cooperation. Let these poise statements be translated into reality, as far as tourism development is concerned.

New Delhi, May 25
After staying above 6 per cent for seven weeks in a row, the inflation rate fell to 5.90 per cent for the week ended May 10 as compared to 6.03 per cent recorded in the previous week.

It was a meagre 1.62 per cent during the corresponding week of the last year. This fourth successive fall in the annual rate of inflation was due to decline in prices of textiles, rubber and plastic products.

The inflation has been steadily rising since mid-December and hit a two-year high of 6.47 per cent in the week ending April 12. After that, it kept declining.
UNI

The BSE Sensex remained lacklustre as weakness in index heavyweights and technology shares offset the strength in old economy shares. Heavy losses in IT shares precipitated a 6.74-point fall in the Sensex to 3,049.84 this week from the previous week’s close of 3,056.58. The factors that pushed the old economy counters higher were a good monsoon, new hopes for disinvestment hope, renewed FII buying good results and higher dividends. The battering of technology stocks continued on worries about the future prospects of software companies. A stronger rupee, pricing pressure and growing competition unnerved investors.

Banking PSU — book profit

The sharp upswing, which has been going on in banking shares for quite some time has showed no sign of easing. The latest surge in banking PSU stocks is due to the expectation that a few banks will return the capital to the Government of India, which will result in a lower equity base. The triggers for the rally in state-run bank stocks have been the current low interest regime and improvement in the asset quality of banks. Investors can book profits on every rise in these stocks as traders have found these a substitute for tech stocks and one bad news can trigger heavy selling of these
stocks.

PSU stocks — buy selectively

PSU shares surged on the hope that the government will go ahead with privatisation drive despite intense political pressure. The government invited bids for the appointment of a financial adviser for the disinvestment of Rashtriya Chemical Fertilizers
(RCF). It may do so for the stake sale in BPCL. RCF surged 18 per cent for the week to Rs 29.70. BPCL advanced by four per cent to close at Rs 251. The disinvestment story still has a lot of steam left in it but investor should be selective in the stocks that they buy and be patient for the story to unfold. The shares that can be accumulated are
GAIL,HPCL, BHEL and Nalco.

Steel — buy

Steel shares spurted on reports that China may raise its import quota, leading to increased exports from India to that country. Moreover, the European Union has decided to cut domestic production raising hope that the Indian exports to that continent could also rise. Investors also expect domestic companies to get some orders for the reconstruction of Iraq. Moreover, a few steel firms undertook comprehensive restructuring over the past couple of years, raising hope of a better financial performance. SAIL spurted by nearly 20 per cent. Essar Steel jumped on the news that the company had negotiated a deal with its FRN holders. The stocks to watch are Tisco and Jindal Steel.

Forecast

The Sensex has continued to trade in a range near its 40 DMA. There were divergent moves across various sectors. After completing a bounce the techs have resumed their downturn. On the other hand old economy stocks are in the process of completing their bounces or toping out. The index remained in a range between its supports at 3037 and 3024 and its resistances at 3067 and 3080. A fall below 3024 will see the index testing 3003. A break below 3003 will confirm the beginning of a downmove in the market.

Overall the market is expected to remain largely lacklustre with sector specific activity. Steel, Cement and banking will continue to drive the market for the time being.

Sometime ago, the apex consumer court took a serious note of the delay on the part of the Haryana Urban Development Authority
(HUDA) in complying with the orders of the consumer courts and imposed exemplary costs on it. It’s common order in two similar cases sends a clear message to not just the land development authorities, but to all service providers and manufacturers that the consumer courts will not condone such lackadaisical attitude.

Whenever a consumer court issues an order, the opposite party has to comply with it, even if an appeal is filed against it. The only exception is where a stay order is obtained on the implementation of the order and such cases are rare. However, service providers and manufacturers often resist paying the compensation amount awarded by the court on the ground that they have filed an appeal.

The apex consumer court has time and again warned against it and this order should not only be a strong reminder to land development authorities, but to all those who do not comply with the orders of the consumer courts with alacrity.

In its order in the case of Lucknow Development Authority Vs M.K.Gupta, the Supreme Court had held that whenever state-owned service providers are asked to pay compensation to the consumer, the courts should ask the service provider to identify officers who are responsible for the deficient service and recover the compensation amount from such officers.

Now, the National consumer Disputes Redressal commission or the apex consumer court has gone one step further and said that even exemplary costs imposed on service providers should be recovered from those officers who are responsible for the delay in complying with the orders of the consumer courts.

Laying down clear guidelines to consumer courts at the district and the state level, the National Commission said whenever a consumer comes back to them with a complaint that the money ordered to be refunded has not been paid, the consumer court should call for a report from the Estate Officer (in this case HUDA) by issuing a notice. The report of the Estate Officer should contain the reasons for the delay and the names of all the officers who dealt with the file. When there is no adequate reason for the delay, exemplary costs should be imposed and this should be recovered by HUDA (or any other land development authority) from the officers responsible .

In a scathing attack on HUDA in particular and land development agencies in general, the Commission remarked: "...we cannot be oblivious to the agony of the consumers visiting the officers of the Estate Office, HUDA time and again and still subjected to all sorts of illegal gratifications or otherwise even after success in redressal agencies. We cannot shy away from noticing the fact of rampant corruption in the development bodies, be that be in HUDA, DDA, GDA or any similar body while dealing with consumers."

The provocation for the order came from two revision petitions filed before the National Commission. In the case of HUDA Vs Mahesh Kumar(RP NO 1751 of 2000), where an alternate plot was given to the consumer on the order of the National Commission, HUDA had not refunded Rs 62,480 due to the consumer.

When questioned by the apex consumer court, HUDA said it would pay the amount subject to the decision of the Supreme Court in the Special Leave Petition filed by it. Rejecting such a plea, the National Commission pointed out that there was no stay against implementation of the order of the National Commission by the Supreme Court. It therefore directed HUDA to pay the amount within 30 days along with interest at the rate of 12 per cent calculated from May 17, 1995.

In the case of Pushpa Jain Vs HUDA (RP NO 753 of 2002), the Commission pointed out that even though the Order of the State Commission was given in November, 2000, till May, 2002, when the consumers addressed their grievance to the President of the National Commission, no amount was paid to the complainants.

Ultimately on the intervention of the National Commission, the amount of Rs 5,37,761 was paid. The Commission also imposed exemplary costs of Rs 10,000 for the delay and recorded that "This case shows gross impropriety on the part of the HUDA in not complying with the Orders of the State Commission..."

Observed the Commission: No reason whatsoever is forthcoming (from HUDA) why the amount was not paid for over two years when there was no stay order either of the National Commission or the Supreme Court.

It is stated by the Estate Officer that complainants were asked to give an affidavit and an undertaking to refund the payment in the event of success of HUDA in the SLP filed by it in the Supreme Court. This was not a proper thing to do and no such type of undertaking could have been called for from the complainants We make it clear that once an order is passed which is not appealed against and no stay obtained, HUDA cannot hold on the amount so ordered to be refunded to the complainant".